Visits to pawnshops are up but proposed Senate bill could close them down
Pawnshops in Auburn and across the country are seeing an increase in traffic spurred by high unemployment and a recession. Some say pawnshops and payday lenders are taking advantage of citizens facing hard times and needing a loan. Others argue that these businesses are the only ones willing and able to lend a hand to those in need with nowhere else to turn. What’s clear, is that if a new Senate bill passes, businesses like Auburn Jewelry and Loan may be forced to close their doors forever. U.S. Sen. Richard Durbin, D-Illinois, introduced SB 500: “Protecting Consumers from Unreasonable Credit Rates Act of 2009,” which would cap consumer interest rates at 36 percent. “Within blocks of my home in Springfield, Ill., there are payday lenders charging interest rates of 200 and 300 percent of the value of the loan,” Durbin said in a released statement. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least. Congress must enact protections against predatory lending. America’s working families depend on it.” Some Auburn business owners vehemently disagree. “The bill would literally cut interest in half if not more,” said Ron Solomon, owner of a Lincoln Way pawnshop. “On a $100 loan, I’d make $3 a month.” And he said that’s not enough for him to turn a profit. “I’d have to lay people off,” Solomon said. “I would be put out of business.” The bill states that cash-strapped consumers pay on average “400 percent annual interest for payday loans, 300 percent annual interest for car title loans, up to 3,500 percent for bank overdraft loans.” Going after large institutions that charge exorbitant fees appears on the surface to be a good idea. But Solomon said pawnshops are considered lending institutions and are already regulated by the state. The amount of interest they can charge is capped, currently with an APR not to exceed 60 percent. Many customers bring in used tools, guitars, amplifiers, firearms and treasured jewelry in order to secure a four-month loan. “You bring in collateral, something of value, and I determine what its pawn value is,” Solomon said. For example, a guitar that costs $400 new, might only be worth $200 used. Solomon said he would most likely loan 50 percent of the pawn value. “You get four months to pay it back, along with the interest,” he said. “On the $100 loan there would be $17.50 in interest if the loan is paid in the first 30 days. It goes up 2.5 percent after 90 days.” Solomon said his business is up. He has more customers coming in to pawn items and more shopping for used items. His forfeiture rate is on the increase as well. “Even in a good economy we have 85 to 90 percent redemption,” he said. “Right now we are probably at 70 to 75 percent, which is still good.” Michelle DeRobertis of Lincoln said she has a long history of visiting pawnshops — usually to make purchases. “My first experience with pawnshops was way back in Austin, Texas,” she said recently outside the Auburn Jewelry and Loan on Lincoln Way. “I ended up buying an anniversary band and had my beautiful marquis diamond added to the band.” Unfortunately, DeRobertis wasn’t at the pawnshop to buy anything this time. “I had to pawn my two-carat ring,” she said “I’m broke and need the money. I’m going to school now, but things are tough.” She doesn’t plan on losing the ring and said she’d be back to pay back her undisclosed monetary loan. There are safeguards in place to ensure that the items being placed on hold as collateral are not stolen property. Solomon said a valid state or military identification is required, as well as a thumbprint. That information, along with any identifying numbers, such as serial numbers, of any item being pawned, is sent to the Auburn Police Department to ensure it is not stolen. Solomon voiced his concern with the bill, and not just for himself. If SB500 were to pass, many who pawn items to hold them over to their next paycheck, would be out of luck. “You can’t get a $100 loan from a bank to pay for groceries until payday,” he said. Penne Usher can be reached at penne.usher@gmail.com or comment at Auburnjournal.com.
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I hope this bill passes. It is time all these predators are put out of business. They prey on the poor and helpless. They also buy stolen goods and every one knows that most of the stolen goods in this country is taken to a pawn shop of thier choice because they know no one will ask questions. It is time to end it all. Good riddiance I say to all pawn shops and payday lenders. Oregon outlawed the payday lenders and it is wonderful.
Yeah! Yeah! Damn those small business folks. Those dirty @&*%&#s! The gall! The outrage! The unmitigated audacity! How dare they provide a service! I bet they're even (gasp!) supporting their families! Stamp out evil! Rah Rah Rah!
The shock!
The horror!
Nothing like painting with that old broad brush, eh 'diligent'? Thank you for putting your bigotry and non-intelligence on display. Your parents (if you knew them) must be very proud.
well said MRex
Trying to compare pawn shops and Payday Loans to predators is really a bad idea. These are the two businesses that could care less about the type of credit that you have, they don't care where you work, or even where you live. If you have a job, and can pay the money back they are willing to help you out. Trying to close these businesses down is a terrible idea and leaves people with nowhere to turn for help.
Well! lets see: $3 a month on $100 equals an interest rate of 36% and if it's backed by a pawned item as insurance...that's not a bad business especially when all other bank's CD rates are under 2%; looks like everyone is getting taken by the the money lenders, called banks.
Did you know some of the check cashing stores are owned by the large banks? The big banks won't cash risky checks; but, they will invest in businesses that will because the risk is worth the extra 31%. Don't buy the small business argument, it's a red herring!
Where is Jesus when you need him to throw the money lenders out of the temple? Perhaps he was sent this idea back to Earth and it landed in the mind of a U.S. Senator. We have see where greed has taken us without some form of limits and regulation on the banking profession. It hasn't been good or pretty over the last eight years.
Pawn shops offer no deals. Everyone that pawns something gets ripped off. But close them down? That's nonsense.
BTW, they have to keep records but junkies don't care if they give a real address. I don't know if they (pawn shops) have a way or the means to cross check with all the police agencies for stolen items. If you find your stolen stuff at the pawn shop you still have to pay off the loan they gave to someone else. That's how they roll.
For those of you who missed it in the article:
There are safeguards in place to ensure that the items being placed on hold as collateral are not stolen property. Solomon said a valid state or military identification is required, as well as a thumbprint. That information, along with any identifying numbers, such as serial numbers, of any item being pawned, is sent to the Auburn Police Department (and to the Sheriff's Office if necessary) to ensure it is not stolen.
The California Department of Justice maintains an on-line data base of stolen autos, bicycles, reported stolen property and persons who are wanted or have warrents. This data bases are available to all police in the state and the information on a pawn ticket can be quired against this data if the police have a reason to investigate. At one time CalDOJ recommented that people enscribe their driver's license number on items of value so they could be easily identifed.
"IF the police have a reason to investigate", IF the owner has the serial number, IF the pawnshops were some how connected to the police data base, IF the police checked this information, IF a misdemeanor warranted an investigation, IF pawnshops were all honest, IF this were a perfect world.
What IF something is stolen in Rocklin and pawned in Roseville or Auburn or Sacramento?
I know that law enforcement is trying to make things difficult for the thieves. They're doing the best they can. But IF someone wants to IF their stolen property is at a pawnshop they have to go look and IF they find it they must pay the full amount of the loan. Where's the incentive for the pawn shop. They never lose just the suckers that need money in a hurry and pawn their items lose.
I am a pawnshop owner and the negative stereotyping we receive is more then unfair. Like any industry there are going to be some bad apples. I went to a dentist last week that told me I needed $10,000 worth of dental work when I knew all I needed was a good cleaning - I don't think all dentists are this way. Hollywood has definitely not done good things for us - I loved 'The Crow' but I guarantee you my pawnshop is nothing like the one in that movie. Someone above commented that pawnshops attract criminal - very dumb criminals yes. The smart ones go to ebay or the corner gas station that does its transactions under the table. Pawnshops are required to report every pawn transaction to the police. We require two forms of identification, some pawnshops get finger prints, then send an electronic document to the police nightly with the customers SS#, name, address, physical description, etc... as well as a detailed description of what the person has pawned including serial numbers, model numbers, weight if it is jewelry, etc... Less then half of a half of a percent of goods brought into a pawnshop are stolen and if the item is stolen the pawnshop usually has to eat the cost and the original owner is more then happy that the thief was dumb enough to have brought it to us. The industry average pawn is for $80 and roughly 75%-85% of people who pawn something return to pick the item back up within one month. My customers would be extremely offended if you referred to them as the criminal type. They are low to middle income families struggling to pay their bills, for the most part of no fault of their own. Another misconception is that we rip our customers off or take advantage of them with our higher interest rates. Our interest rates have to be slightly higher as our overhead is much higher then that of a bank or other typical loan establishment and our loans are for very short amounts of time. No where else could someone get a $20/$40/80 loan. We don't shuffle paper, we store high value jewelry and other goods. Our storage room is twice the size of our showroom - our safes are like bank safes. The insurance costs are astronomical and we require extra security - not because of the criminal element but because of the simple fact that we are like a bank and banks get robbed. The modern day pawnshop is not the sleazy whole in the wall you may have seen in the movies (for the most part). I make a modest - middle income living, no mansion or villa in alps. I have 12 employees who have been with me for 5-15 years. I pay my employees very well plus commission plus great benefits. Most people who have negative views of pawnshops have never been to one. Come visit mine if you need a loan or a good deal on a nice piece of jewelry - I promise you won't be disappointed.
PawnBroker, you say: "if the item is stolen the pawnshop usually has to eat the cost" I think you stretch "usually" a bit too far. Having found stolen items at a pawnshop the brokers may be understanding but the "usually make the victim pay the cost of the loan.
It just breaks my heart to see someone lose anything to one of you guys knowing fullwell that you paid very little of what the item was worth. What do you pay between .01 to 10% of the value? Maybe a dollar a point for diamonds. It's not a loan it is sanctioned thievery.
I in no way want to go back and forth but do wish you would visit an NPA (National Pawnbrokers Association) store before making any snap judgments. On average we pay 1/3 the used value on any item we make a loan on. If the item is not redeemed we then sell the item for an average of 2/3 the used value. This is by no means a perfect formula when dealing with goods but we stick to it as best we can. It is called profit margin and without it there would be no reason to have a business. As far as stolen items go... if the victim files a police report the item is confiscated by the police from us, no charge to the victim whatsoever. We can take the extra step of trying to recover our loss from the criminal but I have never recovered a dime in my 15 years of business. The only time we have ever charged a victim is if they refuse to file a police report but are aware an item of theirs was pawned at our store. We encourage them to file the police report as we want the criminal off the street as much as anyone else. People against Pawnshops are the ones who have never used one or have no use for one, the people needing the loans are the ones that will be hurt if we are no longer here.
I don't agree with you on a number of things except that it is useless to go back and forth. The main point of this article is whether Pawn Shops should be shut down. I say NO! As much as I detest buying or selling with you guys I do. fin
I am a pawnbroker in Nashville, TN. I was reading this blog and wanted to clarify some things for Mr. ChuxxR. My store handles several thousand smal short-term loans on a monthly basis, all of which our community depends upon during this hard economic time. The pawn process from the outside seems very simple, quick and indiscreet, however, it is not. The process continues for several days beyond the initial loan encounter. ====>
After identity of the customer is determined, a exact discription of the item is sent to the local pawn unit of our Metro P.D. the item is then immediatly scanned thru thier system to see if it remotely matches any recent police reports, if it is, it is placed on hold for investigation. If not, the customer still can not pick the item up for 2 business days just in case it is reported. At that point, if the item is still in our possession it will be cross-referenced on a daily basis against any NEW police reports. This process lasts for the entire length of time the loan is in our custody. ( Keep in mind we are paying a insurance company to insure the borrower's property ). Now lets just imagine the customer fails to redeem hs loan and lets the item default, ok. Well the store puts the item out for sale to recoup the money invested in the property and to cover the fees, simple. Now lets say someone ventures into the store and buys that property, wow, something happens and they need to pawn it to another store thus starting the process again. The only problem is that this time the item comes back as stolen and the new owner has to prove purchase or he is pawning stolen property because it has only now been reported as missing and is now under investigation. The only thing that saves this purchaser from conviction is the PRIOR clearance of ownership from the last transaction which the pawnshop has record of, thus clearing the new customer of any potential legal problem.===>
Maybe YOU should think about this the next time you go to a garage sale or buy something off of Craig's list for a "great deal", or even Ebay which I'm sure you have in, the past. Get caught with that piece of merchandise and ask if Ebay or Craigs List will help you in clearing your name from "Possession of Stolen Property" for the rest of your life.
I personally have been to court, testified against thieves, witnessed the prosecution of thieves and helped to recover property of the victim countless times ALONG with recovering our company losses along the way. I do this all for far less then what a bank, title loan, attorney and credit card company will ever do for you.
I am personally insulted with your blinded comments based on LITTLE OR NO KNOWELEDGE of this topic WHATSOEVER.
I'll take it a step further.
Go buy a Rolex, gold coins, diamonds, stereo equipment, etc on Ebay and have that item be linked in a investigation for a serious crime. You'll bet your ass you woulda bought it from a PAWNSHOP when your sitting behind bars for 20+ years.
nuff said...